Monday, January 12, 2009

The Four Types of Recession Businesses

Scott McKain : Viewpoint Blog

There are four types of businesses during this recession, and it’s vitally important to understand where your organization fits in during these challenging times.

Some are “recession revitalized – because of the economic pressures, some segments are primed for growth. Typically, these organizations are ones that can leverage a tighter economy to their advantage. If you have a debt collection business, clean up repossessed homes for a bank, do credit counseling, and the like, you are revitalized from this difficult economy. ...

Some are “recession resistant – because of our household priorities, we still find the money to purchase some select items, regardless of the economy. Wal-Mart is doing great — in part, because if consumers perceive products to be non-differentiated, then price is the primary means of comparison. ... Parents will choose to do with less for themselves – cutting back on entertainment outside the home, for example — so they can still purchase a game or toy for their children. And, we obviously will need to see a doctor when we become ill, no matter the economic indicators. Therefore, health care continues to be a strong sector.

A few, however, are what I call “recession renewed.” These organizations examined the market – either at the onset of these difficult times, or with vision prior to its impact – and found a way to renew their company, independent of what was happening within their industry. The fundamental point that creates this renewal is the ability of the organization to set itself apart from its competition.

Silicon Valley Bank decided to differentiate itself from other institutions and focused upon commercial and industrial loans, rather than mortgages. ...

... Buckle found a way to set itself apart for the teen shopper, ... that there was room in the market for a store that focused on denim, sold all the hottest brand names, as well as mid-priced designer jackets, shoes, and dresses for teens.

The hallmark of these renewed businesses is that they follow the four-step process I outline in my upcoming book, “Collapse of Distinction: Stand Out and Move Up While Your Competition Fails.”

The fourth group, however, is “recession ruined.” These companies are finding themselves on the ropes, or down for the count, because their lack of distinction made them practically irrelevant as the economy tightened. Look no further than General Motors for an example here. ...

I write in my new book about noticing a sign at a meeting that said, “Sales Cures Everything.” ... If you have a bad product, selling more of it does not cure your problem. If you have horrible customer service, selling more just creates more dissatisfied customers. If your costs are out of line, selling more just means you squeak by a little longer.

Sales extends everything ...– but it doesn’t cure a thing.

In this economy, to become “recession renewed,” you have to develop points of demarcation to distinguish yourself in the market. As counterintuitive as it sounds, if you focus singularly on sales, you will fail to take the steps necessary to renew your organization. Focus on differentiation – why someone should do business with you instead of your competition.

If you cannot think of what makes you unique for your clients…you should now have a pretty good idea of where you should start.